Technicals | Sep 19 2013
Bottom Line 18/09/13
Daily Trend: Up
Weekly Trend: Up
Monthly Trend: Up
Technical Discussion
We’d pencilled in an interim top during our last review of David Jones ((DJS)) which came on the back of two patterns. The first was a rising wedge with the upper boundary being tagged and rejected a few days prior to our last look at the company. Generally these are high probability reversal patterns although of course nothing is guaranteed. And in this case the lower boundary of the wedge failed to be penetrated. The basic wedge shape is still in position although it’s now losing symmetry. In fact we’d need to see an aggressive downside break to suggest the origin of the pattern circa $2.40 is going to be tagged which would be the norm for this type of setup. The other bearish pattern was Type-A bearish divergence which is still in position today though again it’s no longer a textbook example. There is still a chance of a downside break although it’s no longer a high probability proposition with one reason being that the 61.8% retracement level has been exceeded. As we’ve been mentioning often lately when the typical retracement zone is overcome a larger flat pattern is often the way forward which is now a possibility here.
For the most part price has been chopping back and forth between $2.00 – $3.00 since August 2011 making for frustrating trading conditions. Trading ranges are all well and good with many traders happy to buy at support and sell at resistance with plenty doing quite well out of the strategy. You just have to be cognizant of the fact that a decent trend isn’t going to materialise. So for the moment we have to be aligned to the likelihood that more of the same choppy price action is going to be the way forward. In regard to our wave count it’s very noticeable that the probe down to wave-A was clean and strong so is therefore impulsive in nature. On the flip side, the subsequent rebound higher has been the exact opposite. It’s more been a case of price stepping its way higher with overlapping wave structures continuing to dominate. This is always an indication that the corrective pattern is still in progress. A continued meander higher up to the high of wave-(X) followed by rejection would portend to another decent leg south.
Trading Strategy
We offered a shorting opportunity last time though with the pattern subsequently starting to fail we pulled the pin with no trade made. Aggressive traders could still sell following a break beneath yesterday’s low with the initial stop placed just above the prior pivot high at $2.96. It offers a low risk set up though I’m not going to make a formal recommendation as the patterns are starting to lack clarity. Still, if you’re looking to balance your portfolio with some short positions then David Jones is worth considering. There is certainly no evidence that the current move higher is the initial stage of something much more bullish.
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